The OIG Endorses Two More Gainsharing Programs

On December 28, 2007, the Office of Inspector General ("OIG") issued Advisory Opinion No. 07 21 involving a group of cardiac surgeons and Advisory Opinion No. 07 22 involving a group of anesthesiologists. The OIG concluded that the two arrangements implicated the civil monetary penalty ("CMP") of the Social Security Act ("Act"), 42 USC § 1320a 7a, and also the Anti Kickback Statute ("AKS") found at 42 USC § 1320¬7b. In both cases, the OIG concluded that it would not impose penalties or administrative sanctions.

However, the OIG, whenever it reviews gainsharing arrangements, is worried that any incentives for physicians to share with hospitals their cost saving measures will result in (1) stinting on patient care, (2) cherry picking healthy patients and steering sicker (and more costly) patients to hospitals that do not offer such gainsharing arrangements, (3) payments for patient referrals, and (4) a race to the bottom among hospitals offering such gainsharing programs in an effort to generate physician loyalty and to attract more referrals. Despite these reservations, these two approved programs follow six previously approved gainsharing arrangements described in 2005 (Advisory Opinions No. 05 01 through 05 06), so it is important to review what causes the OIG to endorse some programs. This article will comment specifically about OIG Advisory Opinion No. 07 21, but both opinions contain very similar arrangements.

In the gainsharing program between the hospital and the cardiac surgeons, the surgical group, to create the cost savings, incorporated 25 specific recommendations that were principally grouped into the following four categories:

1. Disposable Cell Saver.

The first category involved a recommendation that the surgical group refrain from opening disposable components of a cell saver unit until a patient experienced excessive bleeding. The hospital certified that their resulting delay in cell saver readiness did not adversely affect patient care.

2. Use as Needed Supplies.

In the second category, the surgical group limited the use of certain surgical supplies to an "as needed" basis. As part of this recommendation, there was a proposed limit to the use of certain medications, such as Aprotinin, so that it was only used to prevent hemorrhaging with patients with a high risk of that condition.

3. Product Substitutions.

For the third category, the surgical group substituted less costly items for items then being used by the surgeons. It was clear from the Opinion that the individual surgeons still could obtain the other items and supplies if so desired.

4. Product Standardization.

For the fourth and final category, the surgical group standardized the use of certain cardiac devices and supplies when it was medically appropriate.

The arrangement with the hospital involved several safeguards to protect against inappropriate reduction in services. The arrangement used certain objective, historical and clinical measures reasonably related to the practices and the patient population of the hospital and, in some cases, national data to establish certain minimum floors below which no savings would accrue to the surgical group. For example, a best practice required that the program not pay any savings that would result in reductions in cell saver use below a 30% floor. Likewise, for Aprotinin, the hospital established a 10% floor based upon national best practice data.

Civil Monetary Penalty.

The CMP portion of the Act prohibits any hospital from knowingly making a payment, directly or indirectly, to a physician as an inducement to reduce or limit items or services to Medicare and Medicaid beneficiaries. The OIG concluded it would not seek sanctions against the hospital and its physicians under the program offered to the cardiologists for eight reasons.

1. The transparency of the arrangement was obvious due to the list of the specific cost saving actions and the resulting savings having been clearly and separately identified.
2. The hospital and physicians offered credible medical support that the gainsharing program did not adversely affect patient care.
3. The amount paid under the arrangement was based upon all surgeries, regardless of the patient’s insurance coverage, and was subject to a specified cap or limit on the payment to the physicians involving federal health care program procedures. Moreover, there was evidence that the surgical procedures were not disproportionately performed on federal health care program beneficiaries and the cost savings were calculated on the actual out-of-pocket acquisition costs, not an accounting convention of such costs.
4. The arrangement protected against inappropriate reductions by using objective historical and clinical measures to establish baseline thresholds (or similar national benchmarks) beyond which no savings accrued to the surgical group.
5. The product standardization portion of the arrangement further protected against inappropriate reductions in services by ensuring that all the surgeons still had available a full selection of devices and supplies, despite the proposal to use one of the standard devices and/or supplies.
6. The hospital and the surgical group provided written disclosures of their involvement in the gainsharing program to patients.
7. The financial incentives under the arrangement were reasonably limited to one year and were capped on the amount.
8. Because the surgical group distributed profits to its physician members on a per capita basis, there was no incentive for any individual surgeon to generate disproportionate cost savings.

Anti-Kickback Statute.

The OIG indicated that even though the AKS was potentially implicated, there were three major reasons why the government would not impose sanctions:

1. First, the arrangement was not used to attract referring physicians or to increase referrals from existing physicians. The physician group involved was already at the hospital and the potential savings derived from the procedures were capped based upon the prior year’s admissions of federal health care program beneficiaries. Finally, the contract year for which savings were based was limited to one year, reducing any incentive for physicians to switch facilities to earn cost savings payments, and patient admissions were monitored to make sure that there was not any cherry picking.
2. Second, the structure of the arrangement eliminated risk that the arrangement might have been used to reward cardiologists or other physicians who refer patients to the surgical group. The surgical group was the only participant in the gainsharing arrangement and it was composed entirely of cardiac surgeons, with no cardiologists participating in the gainsharing program. Also, within the surgical group, any gainsharing profits were distributed on a per capita basis.
3. Third, the arrangement set out with specificity the particular actions that generated the cost savings. The OIG believed that because the surgical group did take risk by limiting the surgical devices and supplies and by implementing the 25 cost savings programs, it was reasonable for it to receive some compensation. Plus, the payments seemed to be reasonable in the sense that they represented one year’s worth of cost savings, were limited by the cap, were limited in duration to one year, and were limited in scope due to the floors established in certain categories. The payments did not appear unreasonable (although the OIG would not opine that they were at fair market value since that is not permitted under the Act) since the physicians only received 50% of the cost savings, and there was the cap on total remuneration to the surgical group.

The other OIG Advisory Opinion No. 07 22 is similar in its reasoning and cautious endorsement. It is worrisome that although the OIG continues to carefully bless certain gainsharing programs between hospitals and the physicians, CMS has yet to issue a Stark law opinion doing the same. Please see our Health Care Law Report article of February 2006, concerning "Gainsharing and the Stark Law" for the issues raised by a gainsharing program with the physician self-referral law. However, it is encouraging that the OIG continues to carefully endorse programs that encourage hospitals and physicians to collaboratively work towards lowering health care costs without compromising patient quality and services.